The next question is whether they're subject to the 2% limitation or not. The Supreme Court in the Knight case earlier this year looked at expenses and the 2% limitation but I don't think the result is clear enough to answer your question.

One colleague of mine says that these expenses would not be subject to the 2% limitaion because if the decedent was alive, they wouldn't be deductible. Hence, they are expenses that are only incurred because the property is owned by an estate or trust.

The other view is like the previous responder - investment expenses which are subject to the 2% limitation.

Mary Kay Foss